Mind the legal software gap: New school v Old school

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Adams: law firms are in simplistic terms content businesses

Posted by Arlene Adams, founder and CEO of Legal Futures Associate Peppermint Technology

Over the last few years a growing gap has emerged between new school and old school law firms. It’s not as many predicted, in that new firms would emerge and take over the world while long-established firms would fail to respond and disappear. Far from it. Some new firms are struggling to surface above water while a number of traditional firms are finding new ways to reinvent themselves.

There are some great examples of long-established firms – like Blake Morgan, Darbys, Brethertons and Ashton KCJ – that are enjoying rapid growth and taking market share. Perhaps the more interesting changing dynamic is the emergence of ‘breakaway’ firms. There is a growing trend, which I think we will see a lot more of, where lawyers are leaving firms because they are disenchanted by a firm’s lack of willingness and agility to change.

This, I think, represents most risk to the very large firms where “turning the Titanic” is a massive task. Many talented individuals see it easier to go alone and are jumping from the bigger ship and heading for a more nimble, fast-moving speedboat to navigate the choppy waters. The logic makes sense; it is easier to start again than enable the change.

It’s not all about size (or age for that matter)

While many commentators have suggested mid-sized firms will be the losers, I think they could be the winners. They aren’t so big they can’t move and change and, unlike new entrants, they have clients. Firms in this space are uniquely placed to exploit and mine their greatest asset – customers – while applying new business models and technology to transform their service into what clients are demanding.

Irrespective of a firm being a new entrant, a breakaway, a mid-sized firm or a large player, there are two factors that will have a profound impact on their destiny. The first is culture. This is about the mind-set, leadership and shareholding of the business, and a whole topic in itself which I don’t plan to go into here apart from saying that if your culture is closed to change, or fearful of change, you will be on the downward spiral.

Technology is the other factor. Technology, in particular software, will not just enable but define a law firm in the years ahead. Law, like all other businesses, will continue to evolve and mature. Part of this cycle involves a change in where customers place value. In the legal industry more legal tasks and outcomes will be commoditised and greater value will increasingly be placed on the service a law firm delivers.

Law firms are in simplistic terms content businesses. The real success stories, across all areas of law, will be those firms who start to think, act and operate like a digital business. This doesn’t mean that personal relationships disappear. In many instances it will be the opposite and software will play an increasing role in supporting firms to achieve this as the value chain shifts.

The search for the truth

What will be common, and critical, across all areas of law is the ability of a law firm to capture and interrogate data, especially data connected to the customer. It is this data, often referred to as ‘big data’, which will become the golden asset of a firm. Data is what will enable law firms to understand what services clients want, how they want it, when they want it and how the firm is performing against this.

For law firms this means a huge change in how they approach systems. Many law firms today have single silos of data in different systems, and as technology evolves, they add more silos. The problem with this model is that systems get very complex and the law of diminishing returns starts to apply. I can already seeing this happening. Firms struggle to get a single source of the truth, let alone a single view of the customer, and therefore fail to design and deliver the optimal service experience.

Old school legal software was designed and built for the finance department, and at best the fee-earner. New school legal software is designed and built for the client experience. For this reason any investment in software shouldn’t be a technology decision but a critical business strategy decision taken by the business owners. This type of ‘new law’ software is about underpinning the business with an ethos, strategy and set of behaviours that recognise the competitive advantage of a law firm is moving toward the customer experience.

Corporate and private clients alike are increasingly making buying decisions based on the service experience and increasingly assume the legal work will be of quality. Hourly billing, and the complex systems that go with this model, are being challenged like never before and new systems have to reflect the new models and services that clients want to buy.

Will the cloud deliver a bright future?

While on the topic of new law firm technology, there is also a warning to be heard. There is currently an unjustified frenzy around ‘cloud computing’, and I am saying this as the leader of a tech business that has just won the prestigious Cloud World Series Best Application of the Year 2014 award.

There is a lot of discussion, and huge media coverage, on cloud computing. In my view, while there is value in this model of computing, it’s not as critical as the software itself. Cloud computing is simply a delivery model for running software applications. In simplistic terms, it is a business and financial decision as to if it makes more sense to run and operate technology as a law firm or hand the operation over to a team of specialists to do it for you.

The notion that new school buys cloud and old school want to keep control of technology in-house is, in my view, flawed. I think both models can exist successfully. The decision to move to cloud-based solutions will depend on the size of firm and the status of their investment in people and infrastructure.

It’s certainly easier, faster and cheaper for new firms to adopt cloud because it gives them quick access to a service at a cost-effective price. They don’t need to incur the cost and time of doing it all themselves. This undoubtedly will get new firms to market faster. Larger firms, at the correct stage of their asset lifecycle, may consider cloud as it allows the business to focus on their core competency – delivering legal services – and let other IT providers support them.

At the end of the day, cloud is just a delivery model. It’s not dissimilar to what IBM was delivering 30 years ago in the form of outsourced mainframe services. The focus and attention on cloud versus in-house is misplaced and a distraction from asking the important strategic questions and decisions around legal software.

Keeping your eye on the right ball

I don’t see the technology gap between new and old school law defined by the longevity of firms and certainly not by cloud computing. The technology gap is driven much more by a firm’s realisation that the customer and data will have a profound impact on its success. Those firms that get this, both new and old, will embrace new technology and ensure the customer is at the centre of everything they do.

Those firms that are inwardly facing, and focus their software on billing and matter management, will fall behind in this highly competitive market. It’s not that billing and matter management aren’t important, but if you design a service around the customer, then the billing and matter management will look after itself. If you design a service around an inward-looking process, then customers will leave and go to a firm who put them at the centre.